ALA Webinar-Legislative Update – March 6, 2025 – American Logistics Association

• WASHINGTON

The American Logistics Association (ALA) held another one of its periodic webinars on March 6, this one dealing with an update on a number of topics, including federal cuts and reforms, and their impact on resale programs and on-base businesses.

Hosted by ALA President Steve Rossetti, the webinar — sponsored by Tyson Foods — gave attendees insight on what is happening during the new administration’s first weeks in office, and how it impacts business now and into the foreseeable future.

OPENING REMARKS

“This is our continuing series on quite a bit of fast-moving developments in the federal sphere in which we operate,” Rossetti said. “I want to make sure that we have regular updates on everything that is going on.”

And that includes what is happening with the Department of Government Efficiency (DOGE), which he described as “the big elephant in the room,” and how its mission statement of government efficiency is running through so many issues related to the industry at this point in time.

DOGE

“Elon Musk heads up DOGE, they do have a staff of mostly computer programming types that have moved into all of the agencies,” Rossetti said. “What they generally do is they pull down all the data, they run algorithms, they sort and sift the data, and by contract codes and other indicators, they develop a list of targets, and then they drop a bomb. That is what you are seeing in all of these reductions that are taking place.

Rossetti continued, “Right now, people are trying to figure out — including me — whether this is a reorganization of government, whether it is a cutting exercise, or whether it is a dismantlement of government. And I think that appears to be all of the above.

“The big issue, of course, is the fact that the deficits are unsustainable at $2 trillion, we are taking in about $4.5 trillion and spending about $6.5 trillion, and that equals a $2-trillion deficit. These are extraordinary levels never seen before, and probably, the last time we had the budget balanced, the deficits were at $200 billion to $300 billion levels, and now we have about 10 times that. So basically, the government is running out of money.

“That is what I think is at the root of what the president is trying to accomplish in terms of reductions and reorganizations, and certain agencies have been hit, including the Center for Disease Control (CDC) and the U.S. Agency For International Development (USAID). There is a report that there will be an executive order out in a couple of days to abolish the Department of Education (DOE).”

Rossetti continued, “Over at the Veterans Administration (VA), there was an announcement that they would be cutting about 80,000 jobs at the Department of Veterans Affairs (DVA), and they have already terminated contracts at the DVA. Over at defense, they move to lay off thousands of probationary workers. That surges and gets rolled back depending on which day it is, but suffice it to say that defense is participating in these reductions.”

Rossetti told attendees that the House Armed Services Committee (HASC) has asked the Army, Navy and Air Force Service chiefs to give them their recommendations on what cuts should take place at the Department of Defense (DoD).

“Secretary of Defense Pete Hegseth has issued orders for an 8-percent cut to DoD, and that is being salami-sliced across a lot of entities including the Defense Commissary Agency (DeCA),” he noted. “And for DeCA, an 8-percent cut comes out to about $120 million a year, so it is substantial, especially when DeCA Director John Hall is trying to implement many improvements to the commissary benefit.”

The ALA president said that the stated objective of the cuts, which would be somewhere in the neighborhood of $50 billion to $70 billion, is that “they would re-channel this into more war-fighting capability, and take this out of softer areas of DoD.

“We haven’t seen any judgments about what these softer areas that may be hit are, but suffice it to say that the closer you get to the tip of the spear, the more secure the funding is; the further you get away from that, then things start to get put under the microscope.”

Rossetti said that there have been lists circulating in DoD, but “we have not seen them, but they are, already, various outlets for reductions are streaming up to the leadership of the Office of the Secretary of Defense (OSD) to see where the cuts should take place.

“We don’t know to the extent of any of our programs are on these lists — certainly we want to keep them off these lists — but I think that this is going to unfold on a daily basis going forward, because DOGE just moved into the Pentagon.

“Right now, DoD is a very rich treasure trove of data, and a vast enterprise, and DOGE is just getting in there, so we suspect to see, over the next couple of weeks, these algorithms kicking in, data starting to be sorted and sifted, targets being generated, and that will feed into this process where DoD and all entities leading into DoD are feeding into Hegseth to make reductions, and DOGE will be pouring gas on that fire with all of the data that is going in.”

Rossetti said that he expects during the next couple of weeks, “We will see some major action over at DoD, and again, we don’t know how it will affect the top line at DoD, the $856 billion they get now … any reductions that are taking place at DoD will allow DoD to keep the money and re-channel it to other purposes as opposed to just accruing to the treasury. We hope it stays in the ‘O5O’ account, the defense account, and that DoD can keep that money, which will take more pressure off of this exercise.”

The ALA president stated that DOGE is not going away anytime soon.

“All indications are that DOGE is here to stay for at least the midterm,” he stated. “I think that what we saw the other day is that Russell Vought, who is head of the Office of Management and Budget (OMB), the budget chief for the federal government, issued an executive order that basically institutionalized DOGE, and called for elimination of duplicate functions, reorganization, cuts down the line … your major heavy hitting type of stuff that is going to have a major effect on the federal space.”

FEDERAL FISCAL MATTERS

The ALA president characterized that current situation as “a traffic jam on the Hill” in federal funding, “and the White House is tied up in that.”

He explained that a “continuing resolution” is currently in place.

“This is the way the Department of Defense is currently funded at last year’s funding levels, and this resolution currently expires on March 14, and we are tracking whether the government will shut down or not,” he explained.

“The state of play right now is that the appropriations committees are trying to get deals on full-year appropriations for all agencies,” he said. “It doesn’t appear that we are going to get there, and what they are driving toward is what they call a ‘patch,’ to allow a couple more weeks or months so that they can get their act together in terms of full-year appropriations.”

Rossetti stated that “there has been some talk” since the Democrats are so upset about DOGE and a lot of the cuts and actions by the White House that affect federal operations, “that they would shut down the government, but that doesn’t appear to be the case.

“What is more likely is that the Democrats will push for a patch in the regular order of appropriations, and we will have a situation, with the most likely outcome being a full-year continuing resolution, and that appears to be the way it is shaping up now.”

Rossetti added that the chairmen of the appropriations committees are hoping “that they can get their act together and get full-year funding.”

He said, “This is important for our business. If the regular order of appropriations is passed — meaning that we get an appropriations bill for this fiscal year — then defense is funded at a much higher level, and that reduces pressure on all of the defense accounts.

“All of this is apart from what is happening with DOGE, but at least if we can get a full-year appropriation, it will relieve a lot of the pressure.

“But like I said, the most likely outcome is a several week or several month continuing resolution — it might be a full-year continuing resolution which funds defense at a much lower level — but hope springs eternal that they will get a regular order for appropriations out the door, and it will be able to fund defense at a much higher level for the fiscal year.”

Rossetti said the part of the traffic jam “is that we have a debt ceiling issue. The debt ceiling has been breached. We are now operating under what they call ‘extraordinary measures’ by accessing reserve accounts in the government.

“The jury is out on whether or not they will be able to get a debt ceiling increase by the time that these extraordinary measures expire in August or September, but the likelihood is that they will increase the debt ceiling.

“President Trump wants to do away with the debt ceiling, but the more likely outcome is that they increase the debt ceiling and they will keep going forward.”

Another issue in this traffic jam is “reconciliation.”

“They way to view this is simply that under reconciliation, if issues are tied to an approved budget resolution, then you can go with a simple majority in the senate, you don’t have to get a 60-plus-vote majority to break filibuster.

“What is going to move in that reconciliation package is still up in the air, but the tax package will move as part of that, and there is some debate as to what the tax package entails, but that is all tied up with these other issues, and hopefully, there will be a grand deal — the president says he wants to have ‘one big beautiful bill’ — and that will be the tax package, the border issues and some other issues that would be put up into this package.”

Rossetti noted that there is “some speculation” whether or not that after the tax package is pushed through, they may take the foot off the gas on some of these DOGE issues, some of the cuts, and some of the government disruption.

EXECUTIVE ORDERS

“There have been close to 100 executive orders, with some more near and dear and impactful for us than others,” Rossetti said. “The most impactful ones are in the personnel areas, the return to work, hiring freezes, probationary employee cuts. Those executive orders are very impactful.

“Depending on which day it is, depending on how the lawyers are interpreting it, and depending on how the executive orders are worded, and the implementation guidance of these executive orders, some affect non-appropriated fund programs of the department, and some don’t. We are still sorting through that.

“All of them generally affect DeCA, but there is a little back and forth in terms of how these personnel executive orders affect the non-appropriated fund programs. We are reporting out in real time in our communications, but these interpretations are made up and down the chain by the Army, Navy and Air Force, by DoD, so while I can’t report to you today about how these executive orders affect appropriated fund programs, suffice it to say that they in some cases have an effect, in some case they don’t.”

Rossetti said that military resale’s operations on base “are critical to the defense mission. What we are trying to do here at ALA is to round up all the policy issues that are in this while mish-mash of reform in this regulatory tsunami that is coming out of the administration, and make sure that the policy makers are aware that these 1,000 cuts-type of framework, where you have policies coming out from different directions, how that has a cumulative effect on the on-base business model, and how it affects the ability of the on-base businesses, the commissaries, exchanges, food service entities to support the department’s mission.

“At ALA, what we are doing is gathering up all of this information. We want to make sure that all of the people who matter in the administration are aware that this is a terrific program that serves the taxpayer very well, it is a ‘self-licking ice cream cone’ in the sense that money is generated by the system and is returned to the shareholders, or to the troops, and it something that you certainly don’t want to disrupt, and if anything, you want to nurture.

“So we are rounding up all of this material to make sure that people understand all of the issues across the board on our businesses.”

REGULATORY ACTIONS

Regulatory executive orders and regulatory actions that have taken place since the president took office, “cuts both ways,” Rossetti explained.

“In some sense, it is disruptive to operations, and in another sense, it is an opportunity to remove regulations that we had during the Biden years, and even before that,” he stated.

Mentioning some of these regulations that have been damaging to resale operations, Rossetti said that among others, the minimum wage hike, “was one that affected non-appropriated fund employees and was damaging to exchange operations” and is among those regulations that need to be further looked at.

“We are going to be appealing to the administration that these should be undone,” he said. “We are not moving here to hurt people, we are moving here to help people,” because looking at the minimum wage, “the practical effect was to put veterans and military family members out of work because the cost of hiring them became too expensive, and we think it is much more beneficial to the system to return to a locality pay, a framework where we are not paying California wages in Alabama, and pricing the system out of the marketplace.”

Another one that ALA is working on is contractor minimum wage.

“This is separate and apart from the minimum wage that is paid to government workers,” Rossetti noted. “Here again, we believe that it should be a locality-based pay rate, as opposed to an across-the-board pay rate.

“Already, we are seeing some attacks on this contractor minimum wage requirements, where you have concession and other operations on base. That gets disruptive when you have a different wage level on base as opposed to off base. This is particularly true with some of these concessionaire franchise operations on base.

“All of these things have nuanced, discreet effects, but when you roll them all up, they have massive affects on the ability of our system to be able to be responsive to our patrons.”

Rossetti said that ALA would push out communications related to these areas, “and when we disagree with actions taken by the government, we will move to express our opinions as to the advisability of that, and how you can move in a different way to get to the same objectives.”

COMMISSARY PRIVATIZATION

Although the subject of commissary privatization has been squelched numerous time in the recent past, the subject seems to reanimate itself every few years.

Rossetti said that there was a recent article in The Wall Street Journal where they said that the commissaries should be privatized, or eliminated. Even more recently, there was a report by the American Enterprise Institute saying the same thing. There have also been some rumblings on Capitol Hill about this subject.

“We are getting ahead of this one,” Rossetti said. “This is very near and dear to ALA membership, and we are moving to buttress the case for this system.

“Based on the remarkable action that DeCA has been taking over the past couple of years, the cost of the benefit is far less than the actual benefit itself. This is a bargain to the taxpayer, and if you look at the exchange side, it is a bargain to the taxpayer as well, because it generates far more than it consumes.

“We are going to be doubling down on the arguments here. We have had intensive sessions talking about the narrative on this, but these are critical mission support programs, not just benefit programs, and the benefits, the cost savings, are terrific, and the direct contribution to the defense mission is major.”

The ALA president told attendees that the organization just published a report that was provided to congress on the importance of the resale system — exchanges and commissaries, and several other programs — to deal with crises for military families overseas.

“The appropriations committees requested this report, DoD sent it over,” he said. “It said that in the event of a chemical or biological, or nuclear event, contamination or pandemic, or port strike or any disruption, that we can’t have our people for food security purposes overseas marooned and we do need to keep this vital pipeline open. And part and parcel of this, we do need a very robust U.S. stateside base to support our overseas operation.

“We will be doubling down on the benefit side, we will be doubling down on the mission support side, and doubling down on a lot of secondary areas in terms of contributions of this system to make sure that the policymakers understand all of the positive aspects of this program as they go about making these decisions, through DOGE or any other type of restructuring.”

PERSONNEL

Rossetti went down a list of personnel updates that have an impact of the resale business.

As earlier noted in his discussion points, Pete Hegseth was approved as secretary of defense.

There was a recent hearing regarding Steve Feinberg, who was nominated as his deputy.

The president has announced his intention to nominate Anthony Tata as the undersecretary for personnel and readiness, Rossetti said the hearing has not yet been scheduled. DeCA comes under the purview of this office, and there is also some responsibility for exchange operations there, too.

Lee Kelley assumed the duties of the principal deputy of Military Community and Family Policy until that position is filled by current administration.

Rossetti noted, “There is kind of a backup in nominations with the Senate Armed Services Committee, which approves all of these nominees, and makes recommendations to the full senate on their approval, but at least part of the traffic jam is attributable to the fact that many of these folks are businessmen, some are investment bankers … they have a lot of relationships with things that need to be unwound as they go through the vetting process, so the traffic jam on nominations, it kind of stacks up a little bit because of the complexity of the backgrounds of the people that are being put through.”

He also noted, that there will be upcoming hearings on Army, Navy and Air Force secretaries, adding that the Navy secretary will be confirmed shortly, and then followed by the Army and Air Force.

WRAPPING UP

“These are very, very tumultuous times for those of us who have been tracking government for years, both at the congressional level and at the executive branch level, and now, with the courts … never seen anything like it,” Rossetti noted.

“This is an uncertain time,” he continued. “It used to be that the uncertainty in our business was tilted to the commercial side, in other words, how the commercial marketplace was affecting our operations.

“That is still taking place, as we’re still tracking inflation and consumer confidence … but now what we are seeing is on the federal side, even more intense activity.

“We have uncertainty now on both sides of our world, and unfortunately, we are at a nexus where these uncertainties will feed on each other, and it causes a lot of anxiety.”

Rossetti said that even with this situation at hand, “At ALA, we are big believers in this system, and what it can do for the federal government. We are constantly focused, and our number-one question is, ‘How does this affect our business, and operations, and what can we do about it?’’

“We will continue to not only monitor, but act, on issues. There are some things that we might not be able to act on but we will put out there anyway, because they will affect your business and your business planning, especially a lot of the geo-political developments that are taking place that will affect overseas and basing processes.

“We are going to be reporting in real time on everything that is taking place. You have already seen us amping up our communications, and we are going to continue to do that.”

He added that ALA has a dedicated board, headed up by Stephanie Supplee of Coastal Pacific, and 16 other board members “who care and work on your issues, including our councils on the exchange and commissary side. And you have a professional staff here at ALA, that is singularly focused on making sure that this system, and all of its uncertainty, lands on its feet and continues to not only prosper, but to grow.

“You have my assurance moving forward that that is going to be the case.”